Smart Contracts: Taking Back Control Of Our Data And Privacy

By Jessica Billingsley

In a now infamous study, 543 college students unknowingly agreed to give away their firstborn children in exchange for access to a new app, highlighting that truly, no one reads the terms of service without clicking.  It’s clear we need an alternative, but this has been the norm for so long it is taken as a given.  However, a solution may yet be found in the burgeoning Web3 ecosystem, and more specifically the smart contracts that live and operate there.  But more on those later.

It is widely known that privacy in the digital era is an elusive goal - in fact, the system has been designed to make this so.  Many claim to value their privacy, digital or otherwise, yet as evolving technology continues to produce innovative applications and capabilities, the dial has barely moved in terms of establishing any semblance of ownership over our own information.  The coming Web3 era may provide the opportunity to flip the script on the data paradigm.

“Click Here To Indicate You Have Read and Agree” 

We live in the era of "The Terms & Conditions Gatekeeper".  Want to use the smartphone you just bought?  Create a social media account?  Watch a movie on Netflix?  Not without first agreeing to the 'Terms & Conditions'.

There's hardly any product or service you can use these days without first agreeing to non-negotiable terms, all so long and onerous that clicking without reading has become a ubiquitous joke in pop culture. And those years of clicking have granted companies virtually unlimited access and control over our personal data.  Increasingly, ownership over our data has been eroded away. 

Social networks collect and profit tremendously using your personal information by assembling it all into a profile that advertisers use to target ads to specific demographics.  When you post pictures to Facebook or Instagram, you have (per their Terms & Conditions) granted them "nonexclusive, transferable, sublicensable, royalty-free, and worldwide license to host, use, distribute, modify, run, copy, publicly perform or display, translate, and create derivative works of your content".  You still own your photos, but technically so does Facebook. 

What if you decide not to use a social network – is your data safer?  If you use the internet at all, probably not.  Simply loading a website can download a tracking cookie that will transmit information back to a third party.  The information collected about you can be extensive; websites you visit, Google searches, purchase history, device and location information, advertisements you see, which links you click, and on and on.  In the US, there is no regulation requiring that you even be informed that this data collection is happening. 

This practice extends even to things we do offline.  Just this past January, a Canadian man checked the data in his Facebook account and found they had a record of all of his Home Depot purchases.  Home Depot Canada has since announced an end to their sharing of purchase information with Meta, but there is no telling the extent to which our information is harvested and capitalized upon.

Are Smart Contracts The Solution? 

The advent of the digital era happened quickly, hastened by the widespread adoption of smart phones.  The speed of this change expanded the capabilities of tech companies significantly, while consumer privacy protections still lag far behind.  As Web3 and blockchain technologies continue to proliferate the marketplace however, there is a growing consensus that decentralized, trustless smart contracts may provide the technological capability for individuals to impose more meaningful ownership over their information. 

It may surprise some to learn that the concept of a smart contract was created back in the early 90's by a computer scientist named Nick Szabo. The idea evolved over time as smart contracts took the form of many services which we are familiar with today, like purchasing something on a website. When you click "buy", a block of code automatically places your order with the company and  charges your card for the agreed amount.  This type of smart contract is a centralized one - the whole process is controlled by one party.

Web3 has made possible smart contracts that live and execute completely on the blockchain.  These decentralized contracts allow two or more parties to agree upon transaction terms, which are recorded publicly and immutably on the blockchain.  Changes are allowed, but only if all parties agree . It is extremely difficult, if not impossible, for one party to alter the published agreement - remember, the blockchain itself is validated cryptographically by a huge number of computer nodes (the Bitcoin network currently has over 10,000 nodes across the world). Once the terms of the smart contract are met, the transaction executes automatically.  The result of this decentralized process is faster transactions at lower costs - no middle party needed.

Changing The Game 

Decentralized smart contracts have the potential to completely change the paradigm of our financial and information infrastructure.  As of 2021, every $1 of fraud loss cost the U.S. financial service firms $4, and additionally a taxpayer bill reaching $5.8 billion.  While there will never be a shortage of bad actors, the transparent nature of the blockchain has the potential to make financial fraud significantly more difficult to pull off.  

This extends to individuals as well; currently social media sites can use your information to for profit, dishonest parties can plagiarize or steal your content, etc., but what if it was all made public using the blockchain?  A creator could potentially cryptographically link intellectual property to their identity and be compensated automatically through blockchain-based smart contracts.

The development of decentralized smart contracts and the blockchain infrastructure that they run on still have some evolving to do - for all the hype, we are still in the infancy of the Web3 era.  As this new digital landscape is built, we must loudly advocate for technology that serves the individual over the corporation.  We've had virtually no say so far when it comes to the price we must pay in data and privacy to simply participate in the digital world.  We have taken for granted total lack of ownership over our own information, and in exchange huge companies have harvested enormous profit from their user bases.  

I hope for a future in which we recognize and retain our value as individuals, one in which we have the option to consent to the sharing of our data and in which we share in the generated income - and in which we also have the option not to opt in.  Or, we could continue down a path where a social media network can capitalize upon the creators using their platform, their content, their data, their identities.